Last Friday we spent some extra time
talking about the French election; thinking it might be a significant
event for the markets. Results in France’s election on Sunday saw
centrist Emmanuel Macron and far-right nationalist Marine Le Pen emerge
as the top two candidates for a run-off in two weeks’ time.

Early
polling shows that Macron is expected to win by a wide margin, with one
poll showing the 39-year-old is expected to get 62% of the vote. Le Pen
is considered a risk to markets for a variety of reasons, including her
vow to hold a referendum on France leaving the EU were she to win
election as president. That is early polling and anything can happen in
the next couple of weeks, and even if Macron wins, he will need to forge
a parliamentary majority.

But for now, nervous investors and traders
flipped the switch from safe haven bets to “risk on”. European shares
surged to a 17-month high. The euro scaled back gains after its best open on record.
The major Wall Street indexes posted their best one-day advance since
March 1. The Nasdaq Composite closed at a new record high.

This should be a very interesting week. President Trump tweeted on
Saturday that he plans to announce a “big” tax reform and reduction plan
on April 26. Trump has ordered White House aides to accelerate efforts
to draft a tax plan slashing the corporate rate to 15% and prioritizing
cuts in tax rates over an attempt to not increase the deficit, according to Marketwatch.

Treasury Secretary Steven Mnuchin and National Economic Council
Director Gary Cohn are scheduled to meet Tuesday to discuss Trump’s tax
proposals with Senate Majority Leader Mitch McConnell, House Speaker
Paul Ryan, Senate Finance Chairman Orrin Hatch and House Ways and Means
Chairman Kevin Brady of Texas. The meeting comes in advance of a
Wednesday announcement by Trump; although you might think these leaders
should already know the plan.

Mick Mulvaney, the director of the Office
of Management and Budget, has said it is unlikely the administration
will release a full plan until June at the earliest. So, it sounds like the Wednesday announcement might be long on concept and short on detail.

The Trump administration is preparing to brief all 100 senators Wednesday on the situation in North Korea.
Today, Trump said the UN Security Council must be prepared to impose
new sanctions on North Korea as concerns mount that it may test a sixth
nuclear bomb as early as tomorrow, which marks the 85th
anniversary of the foundation of North Korea’s army.

US officials told
Reuters tougher sanctions under consideration include an oil embargo,
banning North Korea’s airline, intercepting cargo ships and punishing
Chinese banks and other companies doing business with North Korea.

The
State Department said Secretary of State Rex Tillerson would chair a
special ministerial meeting of the Security Council on North Korea on
Friday that would give members the opportunity to discuss ways to
maximize the impact of existing sanctions and “show their resolve to
respond to further provocations with appropriate new measures”. Two
Japanese destroyers have joined the U.S. carrier group for exercises in
the western Pacific, and South Korea said it was in talks about holding
joint naval exercises.

Meanwhile, a government shutdown
is possible on April 29 if Congress doesn’t approve a spending bill to
fund the government. Trump’s biggest demand is a Democratic
deal-breaker: money for his long-promised border wall with Mexico.
Democrats hope he’ll blink to avoid partial shutdown which would start
on Saturday, Trump’s 100th day in office.

Trump insists that Mexico will
pay for the wall eventually, later, in some form. Until then,
he wants American taxpayers to foot the bill. There is an out for both
sides – a short-term spending plan that would provide another week or so
for negotiations after the deadline early Saturday.

US investors are also gearing up for the busiest earnings week of the
earnings reporting season, with over 190 S&P 500 members. Earnings
are coming in better than expected. Of the 100 S&P 500 companies
that have reported results so far, 77 percent have beaten profit
expectations, according to Thomson Reuters I/B/E/S.

This has helped lift
profit growth estimates to 11 percent from 10 percent forecast at the
start of the earnings season. Alphabet, the parent company for Google,
just passed $600 billion in market capitalization – they report earnings
Thursday. Also on the earnings calendar this week: Microsoft, Amazon,
Twitter, Intel, Credit Suisse, Barclays, Daimler and Total.

On Friday, we’ll get a look at first quarter gross domestic product.
GDP is forecast to grow by 1%, maybe as high as 1.5%. But the earnings
per share for S&P 500 corporations is expected to do much better, up
by 11% year-on-year, maybe a bit higher, depending on the forecaster.
Ultimately, this divergence is a reminder that what affects the stock
market does not necessarily have a run-off effect on the economy.

Outside of recessions, S&P EPS can vary from negative to
double-digit growth rates when US GDP is anywhere between 2-4%. Outside
of recessions, it is global growth, investment spending, US
exports/global trade, commodity prices, FX rates, loan growth, and
non-operating factors like taxes, acquisitions, buybacks, and other
reinvestment that drives S&P EPS growth.

The economy certainly
matters very much to earnings, especially for companies that earn most
of their revenue in the US. And financial markets, reflecting confidence
levels and expectations for future earnings, tend to lead economic
growth and downturns. But ultimately it is a mistake to think that
success on Wall Street equates to success on Main Street.

The number of bank branches
in the United States will shrink by as much as 20 percent in five
years, according to a report from commercial real estate firm JLL. This
reduction comes as banks are looking for ways to cut costs and to
encourage their customers to embrace mobile banking technology rather
than completing basic transactions within a physical branch.

The U.S.
banking industry could save as much as $8.3 billion annually if it
trimmed the number of branches and downsized the average bank branch
from 5,000 to 3,000 square feet, JLL found. U.S. banks have reduced
their footprint by around 8 percent since the financial crisis, from
97,000 branches to roughly 90,000.

PPG Industries,
an American paint and chemicals giant, again raised its takeover bid
for Akzo Nobel, the Dutch maker of Dulux paint, hoping to persuade its
rival’s management to engage in merger talks. Akzo Nobel has rejected
two previous offers. PPG’s latest offer would value Akzo Nobel at about
$26.4 billion.

Supermarket operator Albertsons
is exploring a takeover of Whole Foods, according to the Financial
Times. Albertsons is owned by private-equity firm Cerberus Capital
Management, which has held preliminary talks with bankers on a bid for
Whole Foods.

The news comes just weeks after hedge fund Jana Partners
LLC said it had amassed a 9% stake in Whole Foods, and was urging it to
look at a possible sale, change its management board and revise
contracts with suppliers and others.

iHeartMedia,
the biggest operator of radio stations in the US, plans to include
language in its next quarterly report warning investors that it may not
survive another year. iHeartMedia expects cash flow to be negative and
is uncertain as to whether it will be able to refinance or extend the
maturities of some of its borrowings, according to a regulatory filing.

The company has almost $350 million of debt coming due this year, part
of a massive $20 billion debt load it took on as part of a $24 billion
leveraged buyout of then Clear Channel Communications

T-Mobile beat earnings estimates but missed on revenue. T-Mobile said
it added 914,000 branded postpaid subscribers, who pay bills monthly –
that was better than expected. Shares moved higher.

Alcoa rose
more than 2 percent in extended trading on Monday after the aluminum
company reported an earnings beat. However, the company also reported a
revenue miss.

Steve Ballmer
is the former Chief Executive Officer of Microsoft and the current
owner of the Los Angeles Clippers NBA basketball franchise. In his spare
time, Ballmer has been trying to figure out what the government does
with our money, taxpayer money.

Tomorrow, Ballmer plans to make public a
database and a report that he and a small army of economists,
professors and other professionals have been assembling as part of a
stealth start-up over the last three years called USAFacts.
The database is perhaps the first nonpartisan effort to create a fully
integrated look at revenue and spending across federal, state and local
governments.

Want to know how many police officers are employed in various parts
of the country and compare that against crime rates? Want to know how
much revenue is brought in from parking tickets and the cost to collect?
Want to know what percentage of Americans suffer from diagnosed
depression and how much the government spends on it? That’s in there.
You can slice the numbers in all sorts of ways.

In an age of fake news and questions about how politicians and others
manipulate data to fit their biases, Ballmer’s project may serve as a
powerful antidote. Using his website, USAFacts.org,
a person could look up just about anything: How much revenue do
airports take in and spend? What percentage of overall tax revenue is
paid by corporations? At the very least, it could settle a lot of bets
made during public policy debates at the dinner table.

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